Annual Statements Open main menu

RiceBran Technologies - Quarter Report: 2022 September (Form 10-Q)

ribt20220930_10q.htm
 

 

Table of Contents


SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

         


FORM 10-Q

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 For the quarterly period ended September 30, 2022
  
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 For the transition period from __________ to __________

 

Commission File Number 001-36245

RiceBran Technologies

(Exact Name of Registrant as Specified in its Charter)

 

California

(State or other jurisdiction of

incorporation or organization)

87-0673375

(I.R.S. Employer Identification No.)

25420 Kuykendahl Rd., Suite B300

Tomball, TX

 (Address of Principal Executive Offices) 

77375

(Zip Code)

(281) 675-2421

(Registrant’s telephone number, including area code)

 

None

(Former name, former address and former fiscal year, if changed since last report

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading symbol

 

Name of each exchange on which registered

Common Stock, no par value per share

 

RIBT

 

The NASDAQ Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐Accelerated filer ☐Non-accelerated filer ☒Smaller reporting company ☒
   Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule l2b-2 of the Exchange Act).  Yes ☐  No ☒

 

As of November 3, 2022, there were 6,242,077 shares of common stock outstanding.

 

   

 

RiceBran Technologies

Index

Form 10-Q

 

PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited) 3
  Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 3
  Condensed Consolidated Balance Sheets as of September 30, 2022, and December 31, 2021 4
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 5
  Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
PART II. OTHER INFORMATION  
Item 1. Legal Proceedings 19
Item 1A. Risk Factors 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Mine Safety Disclosures 19
Item 5. Other Information 19
Item 6. Exhibits 20
Signatures 21

 

 

Cautionary Note about Forward-Looking Statements

 

This quarterly report on Form 10-Q contains “forward-looking statements” concerning our operations, economic performance and financial condition. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue, liquidity or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services, products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. The forward-looking statements contained herein reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Actual results may differ materially from those projected in such forward-looking statements due to a number of factors, risks and uncertainties, including the factors that may affect future results set forth in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021. Forward-looking statements speak only as of the date on which they are made, and we disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this quarterly report.

 

Unless the context requires otherwise, references to “we,” “us,” “our” and “the Company” refer to RiceBran Technologies and its consolidated subsidiaries.

 

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

RiceBran Technologies

Condensed Consolidated Statements of Operations

(Unaudited) (in thousands, except share and per share amounts)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2022

   

2021

   

2022

   

2021

 
                                 

Revenues

  $ 10,252     $ 6,909     $ 31,001     $ 23,088  

Cost of goods sold

    10,949       7,185       31,673       22,539  

Gross profit (loss)

    (697 )     (276 )     (672 )     549  

Selling, general and administrative expenses

    1,765       1,802       5,165       5,476  

Loss (gain) on involuntary conversion of property and equipment

    -       (1 )     (147 )     5  

Operating loss

    (2,462 )     (2,077 )     (5,690 )     (4,932 )

Interest income

    7       -       9       1  

Interest expense

    (152 )     (121 )     (396 )     (353 )

Change in fair value of derivative warrant liability

    612       -       24       -  

Gain on extinguishment of PPP loan

    -       -       -       1,792  

Other expense

    (39 )     (18 )     (111 )     (55 )

Other income

    -       3       5       3  

Loss before income taxes

    (2,034 )     (2,213 )     (6,159 )     (3,544 )

Income tax expense

    (8 )     -       (20 )     (1 )

Net loss

  $ (2,042 )   $ (2,213 )   $ (6,179 )   $ (3,545 )
                                 

Loss per common share:

                               

Basic

  $ (0.38 )   $ (0.47 )   $ (1.17 )   $ (0.77 )

Diluted

  $ (0.38 )   $ (0.47 )   $ (1.17 )   $ (0.77 )
                                 

Weighted average number of shares outstanding:

                               

Basic

    5,332,308       4,745,684       5,290,780       4,631,880  

Diluted

    5,332,308       4,745,684       5,290,780       4,631,880  

 

See Notes to Unaudited Condensed Consolidated Financial Statement

 

 

 

RiceBran Technologies

Condensed Consolidated Balance Sheets

(Unaudited) (in thousands, except share amounts)

 

   

September 30,

  

December 31,

 
   

2022

  

2021

 

ASSETS

        

Current assets:

        

Cash and cash equivalents

 $4,374  $5,825 

Accounts receivable, net of allowance for doubtful accounts of $123 and $18

  4,995   4,136 

Inventories

  2,687   2,444 

Other current assets

  1,148   810 

Total current assets

  13,204   13,215 

Property and equipment, net

  14,629   15,444 

Operating lease right-of-use assets

  1,868   2,127 

Intangible assets

  411   527 

Total assets

 $30,112  $31,313 
         

LIABILITIES AND SHAREHOLDERS' EQUITY

        

Current liabilities:

        

Accounts payable

 $1,450  $826 

Commodities payable

  1,960   1,702 

Accrued salary, wages and benefits

  908   787 

Accrued expenses

  941   683 

Operating lease liabilities, current portion

  417   382 

Due under bank line of credit

  1,846   - 

Due under factoring agreement, including the Over-advance

  4,926   3,379 

Due under insurance premium finance agreements

  429   128 

Finance lease liabilities, current portion

  130   86 

Long-term debt, current portion

  1,333   1,183 

Total current liabilities

  14,340   9,156 

Operating lease liabilities, less current portion

  1,613   1,948 

Finance lease liabilities, less current portion

  357   100 

Long-term debt, less current portion

  365   1,356 

Derivative warrant liability

  234   258 

Total liabilities

  16,909   12,818 

Commitments and contingencies

          

Shareholders' equity:

        

Preferred stock, 20,000,000 shares authorized: Series G, convertible, 3,000 shares authorized, stated value $150, 150 shares, issued and outstanding

  75   75 

Common stock, no par value, 15,000,000 shares authorized, 5,242,077 shares and 5,158,967 shares, issued and outstanding

  327,166   326,279 

Accumulated deficit

  (314,038)  (307,859)

Total shareholders' equity

  13,203   18,495 

Total liabilities and shareholders' equity

 $30,112  $31,313 

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

 

 

RiceBran Technologies

Condensed Consolidated Statements of Cash Flows

(Unaudited) (in thousands)

 

   

Nine Months Ended September 30,

 
   

2022

   

2021

 

Cash flow from operating activities:

               

Net loss

  $ (6,179 )   $ (3,545 )

Adjustments to reconcile net loss to net cash used in operating activities

               

Depreciation

    1,575       1,821  

Amortization

    116       150  

Stock and share-based compensation

    887       840  

Change in fair value derivative warrant liability

    (24 )     -  

Loss (gain) on involuntary conversion of property and equipment

    (147 )     5  

Gain on extinguishment of PPP loan

    -       (1,792 )

Provision for bad debts

    105       13  

Other

    1       54  

Changes in operating assets and liabilities:

               

Accounts receivable

    (964 )     (18 )

Inventories

    (243 )     (295 )

Accounts payable and accrued expenses

    1,094       594  

Commodities payable

    258       619  

Other

    (338 )     (431 )

Net cash used in operating activities

    (3,859 )     (1,985 )

Cash flows from investing activities:

               

Purchases of property and equipment

    (411 )     (1,187 )

Proceeds from insurance on involuntary conversion

    109       638  

Net cash used in investing activities

    (302 )     (549 )

Cash flows from financing activities:

               

Advances on factoring agreement, including the Over-advance

    28,964       22,135  

Payments on factoring agreement

    (27,417 )     (21,970 )

Advances on bank line of credit

    2,725       -  

Payments on bank line of credit

    (900 )     -  

Advances on insurance premium finance agreements

    928       962  

Payments on insurance premium finance agreements

    (627 )     (677 )

Payments on long-term debt and finance lease liabilities

    (963 )     (534 )

Proceeds from issuances of common stock and warrants, net of costs

    -       3,372  

Proceeds from common stock warrant exercises

    -       171  

Net cash provided by financing activities

    2,710       3,459  

Net change in cash and cash equivalents

  $ (1,451 )   $ 925  
                 

Cash and cash equivalents, beginning of period

  $ 5,825     $ 5,263  

Cash and cash equivalents, end of period

    4,374       6,188  

Net change in cash and cash equivalents

  $ (1,451 )   $ 925  
                 

Supplemental disclosures:

               

Cash paid for interest

  $ 354     $ 267  

Cash paid for income taxes

  $ 19     $ 15  

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

NOTE 1. BASIS OF PRESENTATION

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements (interim financial statements) of RiceBran Technologies and its subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and the rules and regulations of the Securities and Exchange Commission (the SEC) for reporting on Form 10-Q; therefore, they do not include all of the information and notes required by GAAP for complete financial statements. The interim financial statements contain all adjustments necessary to present fairly the interim results of operations, financial position and cash flows for the periods presented of a normal and recurring nature necessary to present fairly the interim results of operations, financial position and cash flows for the periods presented.

 

These interim financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2021, which included all disclosures required by generally accepted accounting principles.

 

The results reported in these interim financial statements are not necessarily indicative of the results to be expected for the full fiscal year, or any other future period, and have been prepared based on the realization of assets and the satisfaction of liabilities in the normal course of business. 

 

In August 2022, our board of directors approved a 1 for 10 reverse split of our common stock. Our common stock began trading on a post-split basis on August 26, 2022. All share and per share information has been retrospectively adjusted for all prior periods presented giving retroactive effect to the reverse stock split. Such adjustments include calculations of our weighted average number of shares outstanding and loss per share, as well as disclosures regarding our share-based compensation and warrants.

 

Certain reclassifications have been made to amounts reported for the prior periods to achieve consistent presentation with the current period. Such reclassifications had no impact on previously reported net loss or shareholders’ equity.

 

NOTE 2. BUSINESS

 

We are a specialty ingredient company focused on the development, production, and marketing of products derived from traditional and ancient small grains. We create and produce products utilizing proprietary processes to deliver improved nutrition, ease of use, and extended shelf-life, while addressing consumer demand for all natural, non-GMO and organic products. We believe our products can become valuable alternatives to traditional food ingredients.

 

Notably, we apply our proprietary technologies to convert raw rice bran into stabilized rice bran (SRB), and high value-added derivative products including: RiBalance, a rice bran nutritional package derived from SRB; RiSolubles, a nutritious, carbohydrate and lipid rich fraction of RiBalance; RiFiber, a fiber rich insoluble derivative of RiBalance and ProRyza, a rice bran protein-based product; and a variety of other valuable derivatives extracted from these core products.

 

In granular form, SRB is a food additive used in products for human and animal consumption. We believe SRB has certain qualities that make it more attractive than additives based on the by-products of other agricultural commodities, such as corn, soybeans, wheat, and yeast. Our SRB products and SRB derivatives support the production of healthy, natural, hypoallergenic, gluten free, and non-genetically modified ingredients and supplements for use in meats, baked goods, cereals, coatings, health foods, and high-end animal nutrition. Our target customers are food and animal nutrition manufacturers, wholesalers and retailers, both domestically and internationally.

 

We manufacture and distribute SRB from four locations: two facilities located within supplier-owned rice mills in Arbuckle and West Sacramento, California; one company-owned facility in Mermentau, Louisiana; and our own rice mill in Wynne, Arkansas. At our Dillon, Montana facility, we produce SRB-based products and derivatives through proprietary processes. Our rice mill in Wynne, Arkansas (Golden Ridge) supplies grades U.S. No. 1 and No. 2 premium long and medium white rice, and our grain processing facility in East Grand Forks, Minnesota (MGI) mills a variety of traditional, and ancient, small grains. Given the integrated nature of these facilities, we have one reporting unit and one operating segment, specialty ingredients.

 

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Recent accounting standards not yet adopted

 

The following discusses the accounting standard(s) not yet adopted that will, or are expected to, result in a significant change in practice and/or have a significant financial impact on our financial position, results of operations or cash flows.

 

6

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

In June 2016, the Financial Accounting Standards Board (FASB) issued guidance ASU No. 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which changes the accounting for credit losses for certain instruments, including trade receivables, from an incurred loss method to a current expected loss method. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts. The guidance, and subsequent guidance related to the topic, is effective for our annual and interim periods beginning in 2023 and we must adopt the guidance on a modified retrospective approach through cumulative-effect adjustment to retained earnings as of January 1, 2023. Based on the nature of our current receivables and our credit loss history, we do not expect the adoption of the guidance to have a significant impact on our results of operations, financial position, or cash flows.

 

NOTE 4. CASH AND CASH EQUIVALENTS

 

As of September 30, 2022, we have $2.7 million of cash and cash equivalents invested in a money market fund with net assets invested in U.S. Dollar denominated money market securities of domestic and foreign issuers, U.S. Government securities and repurchase agreements. We consider all liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

 

We have cash on deposit in excess of federally insured limits at a bank. We do not believe that maintaining substantially all such assets with the bank or investing in a liquid mutual fund represent material risks.

 

NOTE 5. ACCOUNTS RECEIVABLE AND REVENUES

 

Amounts billed and due from our customers are classified as accounts receivable on our consolidated balance sheets and require payment on a short-term basis. Invoices are generally issued at the point control transfers and substantially all of our invoices are due within 30 days or less, however certain customers have terms of up to 120 days. For substantially all of our contracts, control of the ordered product(s) transfers at our location. Periodically, we require payment prior to the point in time we recognize revenue. We classify amounts received from customers prior to revenue recognition on a contract as customer prepayments liability on our consolidated balance sheets. We typically apply customer prepayments to an invoice within 30 days of the prepayment. Revenues in the three and nine months ended September 30, 2022 and 2021, include $0.1 million, or less, in unearned revenue as of the end of the prior year.

 

Our accounts receivable potentially subject us to significant concentrations of credit risk. Revenues and accounts receivable from significant customers (customers with revenue or accounts receivable in excess of 10% of consolidated totals) are stated below as a percent of consolidated totals.

 

  

Customer

 
  

A

  

B

  

C

  

D

 

% of revenues, three months ended September 30, 2022

  15%  5%  11%  -%

% of revenues, three months ended September 30, 2021

  21%  7%  -%  9%
                 

% of revenues, nine months ended September 30, 2022

  13%  8%  5%  2%

% of revenues, nine months ended September 30, 2021

  10%  11%  1%  11%
                 

% of accounts receivable, as of September 30, 2022

  13%  7%  17%  -%

% of accounts receivable, as of December 31, 2021

  15%  8%  -%  9%

 

The following table presents revenues by geographic area shipped to (in thousands).

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2022

  

2021

  

2022

  

2021

 

United States

 $9,876  $6,450  $30,034  $21,867 

Other countries

  376   459   967   1,221 

Revenues

 $10,252  $6,909  $31,001  $23,088 

 

7

 
 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 6. PROPERTY AND EQUIPMENT

 

The following table details the components of property and equipment (amounts in thousands).

 

  

September 30,

  

December 31

     
  

2022

  

2021

  

Estimated Useful Lives

Land

 $730  $730     

Furniture and fixtures

  259   265  5-

10 years

Plant

  10,094   10,457  20-

40 years, or life of lease

Computer and software

  450   452  3-

5 years

Leasehold improvements

  1,838   1,828  4-

15 years, or life of lease

Machinery and equipment

  15,598   15,115  5-

15 years

Property and equipment, cost

  28,969   28,847     

Less accumulated depreciation

  14,340   13,403     

Property and equipment, net

 $14,629  $15,444     

 

Amounts payable for property and equipment included in accounts payable totaled $0.1 million at September 30, 2022, and $0.2 million at December 31, 2021. Assets not yet in service, included in property and equipment, totaled $1.1 million at September 30, 2022, and $0.9 million at December 31, 2021.

 

NOTE 7. LEASES

 

The components of lease expense and cash flows from leases (in thousands) follow.

 

  

Three Months Ended September 30,

  

Nine Months Ended Setepmber 30,

 
  

2022

  

2021

  

2022

  

2021

 

Finance lease cost:

                

Amortization of right-of use assets, included in cost of goods sold

 $20  $24  $59  $67 

Interest on lease liabilities

  6   2   11   8 

Operating lease cost, included in selling, general and administrative expenses:

                

Fixed leases cost

  129   129   387   387 

Variable lease cost

  39   37   125   112 

Short-term lease cost

  41   21   62   60 

Total lease cost

 $235  $213  $644  $634 
                 

Cash paid for amounts included in the measurement of lease liabilities:

                

Operating cash flows from finance leases

 $6  $2  $11  $8 

Operating cash flows from operating leases

 $129  $129  $387  $387 

Financing cash flows from finance leases

 $22  $23  $68  $73 

 

As of September 30, 2022, variable lease payments do not depend on a rate or index. As of September 30, 2022, and December 31, 2021, property and equipment, net, includes $0.6 million and $0.2 million of finance lease right-of-use-assets, with an original cost of $0.9 million as of September 30, 2022, and $0.5 million as of December 31, 2021. During the three months and nine months ended September 30, 2022, we financed the purchase of $0.1 million and $0.3 million of property and equipment in noncash finance lease transactions. During the three months and nine months ended September 30, 2021, we financed the purchase of less than $0.1 million of property and equipment in noncash finance lease transactions.

 

8

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

As of September 30, 2022, we do not believe it is certain that we will exercise any renewal options. The remaining terms of our leases and the discount rates used in the calculation of our lease liabilities as of September 30, 2022, follows.

 

  

Operating

Leases

  

Finance

Leases

 

Remaining leases terms (in years)

  1.0-10.4   0.4-5.0 

Weighted average remaining lease terms (in years)

   5.7     3.0  

Discount rates

  6.3%-9.0%   2.8%-10.4% 

Weighted average discount rate

   7.8%     8.1%  

 

Maturities of lease liabilities as of September 30, 2022, follows (in thousands).

 

  

Operating

  

Finance

 
  

Leases

  

Leases

 

2022 (three months ended December 31, 2022)

 $122  $52 

2023

  528   158 

2024

  429   117 

2025

  440   102 

2026

  450   100 

Thereafter

  578   60 

Total lease payments

  2,547   589 

Amounts representing interest

  (517)  (102)

Present value of lease obligations

 $2,030  $487 
 

NOTE 8. DEBT

 

We finance certain amounts owed for annual insurance premiums under financing agreements. As of September 30, 2022, amounts due under insurance premium financing agreements are due in monthly installments of principal and interest through March 2023, at interest rates of 3.5% to 3.9% per year.

 

We borrow under a factoring agreement with a lender (the Lender), which provides a $7.0 million credit facility. We may only borrow to the extent we have qualifying accounts receivable as defined in the agreement. The facility had an initial two-year term and automatically renews for successive annual periods until delivery of a proper termination notice. The facility term has automatically extended to October 2023. We paid a $0.2 million facility fee upon inception of the agreement which amortized to interest expense on a straight-line basis over the two years ending in October 2021. We incur recurring fees under the agreement, including a funding fee of 0.5% above the prime rate, in no event to be less than 5.5%, on any advances and a service fee on average net funds borrowed. The lender has the right to demand repayment of the advances at any time. The Lender has a security interest in our personal property assets.

 

The Lender advanced us $0.9 million effective September 30, 2022 (the Over-advance), pending restructuring of our mortgage promissory note with the Lender. The Over-advance accrues interest at an annual rate which is the greater of 7.0% above the Lender's prime rate and 10.3% (13.3% at September 30, 2022). The Over-advance is due the earlier of the completion of the restructuring of the mortgage promissory note or December 29, 2022.

 

Additional information related to our factoring obligation (exclusive of the Over-advance) follows.

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2022

  

2021

  

2022

  

2021

 

Average borrowings outstanding (in thousands)

 $3,150  $1,522  $3,036  $1,324 

Amortization of debt issuance costs (in thousands)

 $-  $23  $-  $68 

Interest paid, as a percentage of average outstanding borrowings

  1.6%  2.0%  1.4%  5.0%

Fees paid, as a percentage of average outstanding borrowings

  1.6%  1.6%  1.2%  5.0%

 

As of September 30, 2022, we had $1.8 million outstanding under a line of credit with a bank. The borrowing is secured by our cash on deposit with the bank and bears interest at prime (6.3% at September 30, 2022). There are no stipulated repayment terms for the line as long as we maintain sufficient cash collateral. Our borrowings under the line of credit averaged $1.5 million in the three months ended September 30, 2022, and $0.5 million for the nine months ended September 30, 2022.

 

9

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

Long-term debt consists of the following (in thousands).

 

  

September 30,

  

December 31,

 
  

2022

  

2021

 

Mortgage promissory note - Originally dated July 2020 and modified in December 2021. As modified, interest accrues at an annual rate which is the greater of 7.0% above the Lender's prime rate and 10.3% (13.3% at September 30, 2022) payable in monthly installments through December 2023. Net of $11 debt issuance costs at September 30, 2022. Face amount $2.5 million. Secured by certain real property in Wynne, Arkansas.

 $1,614  $2,469 

Progress payment agreement - Dated August 2022. Original principal $37. Interest is payable monthly at the rate of 25.2% per year. Due in November 2022, unless a finance lease is executed with the lender before that date for the related equipment.

  37   - 

Equipment note - Dated May 2021. Original principal $46. Due in monthly installments through June 2025. Interest accrues at the effective discount rate of 3.6% per year.

  27   33 

Equipment note - Dated December 2019. Original principal $40. Due in monthly installments through December 2024. Interest accrues at the effective discount rate of 9.3% per year.

  20   26 
Equipment note - Initially recorded in November 2018, in an acquisition, at the present value of future payments using a discount rate of 4.8% per year. Due in monthly installments through August 2022.  -   11 

Total long-term debt, net

 $1,698  $2,539 

 

Future principal maturities of long-term debt outstanding as of September 30, 2022, follow (in thousands).

 

2022 (three months ended December 31, 2022)

 $347 

2023

  1,337 

2024

  19 

2025

  5 

Principal maturities

  1,708 

Debt issuance costs

  (10)

Total long-term debt, net

 $1,698 
 

NOTE 9. EQUITY, SHARE-BASED COMPENSATION AND WARRANTS

 

In August 2022, our board of directors approved a 1 for 10 reverse split of our common stock. Our common stock began trading on a post-split basis on August 26, 2022. All share and per share information has been retrospectively adjusted for all prior periods presented giving retroactive effect to the reverse stock split. Such adjustments include calculations of our weighted average number of shares outstanding and loss per share, as well as disclosures regarding our share-based compensation and warrants.

 

On July 14, 2022, shareholders approved a 600,000 share increase in the number of shares of common stock authorized for issuance under our Amended and Restated 2014 Equity Incentive Plan (the 2014 Plan). As of September 30, 2022, 228,201 shares of common stock remained available for issuance under the 2014 Plan.

 

10

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

A summary of equity activity follows (in thousands, except share amounts).

 

  

Shares

                 
  

Preferred

      

Preferred

  

Common

  

Accumulated

     
  

Series G

  

Common

  

Stock

  

Stock

  

Deficit

  

Equity

 

Balance, December 31, 2021

  150   5,158,967  $75  $326,279  $(307,859) $18,495 

Common stock awards under equity incentive plans

  -   22,475   -   241   -   241 

Common stock issued to vendor

  -   600   -   5   -   5 

Net income

  -   -   -   -   (1,516)  (1,516)

Balance, March 31, 2022

  150   5,182,042   75   326,525   (309,375)  17,225 

Common stock awards under equity incentive plans

  -   48,388   -   146   -   146 

Common stock issued to vendor

  -   600   -   1   -   1 

Net loss

  -   -   -   -   (2,621)  (2,621)

Balance, June 30, 2022

  150   5,231,030   75   326,672   (311,996)  14,751 

Common stock awards under equity incentive plans

  -      -   492   -   492 

Common stock issued to vendor

  -   600   -   2   -   2 

Other

  -   10,447   -   -   -   - 

Net loss

  -   -   -   -   (2,042)  (2,042)

Balance, September 30, 2022

  150   5,242,077  $75  $327,166  $(314,038) $13,203 

 

  

Shares

                 
  

Preferred

      

Preferred

  

Common

  

Accumulated

     
  

Series G

  

Common

  

Stock

  

Stock

  

Deficit

  

Equity

 

Balance, December 31, 2020

  225   4,523,809  $112  $322,218  $(298,910) $23,420 

Common stock awards under equity incentive plans

  -   2,994   -   250   -   250 

Common stock issued to vendor

  -   600   -   3   -   3 

Other

  -   -   -   (3)  -   (3)

Net income

  -   -   -   -   591   591 

Balance, March 31, 2021

  225   4,527,403   112   322,468   (298,319)  24,261 

Common stock awards under equity incentive plans

  -   2,964   -   290   -   290 

Common stock issued to vendor

  -   600   -   5   -   5 

Exercise of common stock warrants

  -   17,794   -   171   -   171 

Other

  -   -   -   3   -   3 

Net loss

  -   -   -   -   (1,923)  (1,923)

Balance, June 30, 2021

  225   4,548,761   112   322,937   (300,242)  22,807 

Common stock awards under equity incentive plans

  -   38,978   -   287   -   287 

Common stock issued to vendor

  -   600   -   5   -   5 

Sale of common stock and common stock warrants, net of costs

  -   3,062,395   -   2,725   -   2,725 

Exercise of common stock warrant

  -   1,500,000   -   -   -   - 

Conversion of preferred stock into common stock

  (75)  71,174   (37)  37   -   - 

Net loss

  -   -   -   -   (2,213)  (2,213)

Balance, September 30, 2021

  150   9,221,908  $75  $325,991  $(302,455) $23,611 

 

Share-based compensation by type of award follows (in thousands).

 

      

Three Months Ended

     
  

September 30, 2022

  

June 30, 2022

  

March 31, 2022

 

Stock options

 $28  $21  $29 

Restricted stock units

  464   125   212 

Compensation expense related to common stock awards issued under equity incentive plan

 $492  $146  $241 

 

11

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

Options

 

In the three months ended September 30, 2022, holders forfeited options for the purchase of up to 2,901 shares of common stock (average $19.30 per share exercise price, average 6.9 years remaining life). In the three months ended June 30, 2022, holders forfeited options for the purchase of up to 4,455 shares of common stock (average $21.42 per share exercise price, average 6.8 years remaining life). In the three months ended March 31, 2022, holders forfeited options for the purchase of up to 970 shares of common stock (average $18.48 per share exercise price, average 7.7 years remaining life).

 

Stock Units

 

We have outstanding (i) restricted stock units (RSUs) issued under the 2014 Plan to employees and directors and (ii) other stock units (SUs) issued to a service provider. Each RSU and SU represents a contingent right to receive one share of common stock. Summaries of nonvested and vested stock unit and activity follow.

 

  

Restricted Stock Units (Issued under 2014 Plan)

  

Stock Units Issued to Vendors

 
  

Number of

Units

  

Unrecognized

Stock

Compensation

(in thousands)

  

Weighted

Average

Expense Period

(Years)

  

Number of

Units

  

Unrecognized

Stock

Compensation

(in thousands)

  

Weighted

Average

Expense Period

(Years)

 

Nonvested at December 31, 2021

  126,603  $(658)  0.9   -  $-   - 

Granted

  37,000   (153)  2.0   -   -   - 

Forfeited

  (1,000)  7   0.7   -   -   - 

Vested with service

  (22,475)  -   -   -   -   - 

Expensed

  -   212   -   -   -   - 

Nonvested at March 31, 2022

  140,128   (592)  0.9   -   -   - 

Impact of Modification:

              -   -   - 

Before modification

  (11,468)  125   -   -   -   - 

After modification

  11,468   (60)  -   -   -   - 

Forfeited

  (9,454)  55   -   -   -   - 

Vested with Service

  (34,404)  -   -   -   -   - 

Expensed

  -   125   -   -   -   - 

Nonvested at June 30, 2022

  96,270   (347)  0.9   -   -   - 

Granted

  402,276   (1,458)  2.8   38,968   (65)  3.0 

Vested with Service

  (63,607)  -   -   -   -   - 

Expensed

  -   464   -   -   -   - 

Nonvested at September 30, 2022

  434,939  $(1,341)  2.5   38,968  $(65)  3.0 

 

  

Number of

RSUs

 

Vested at December 31, 2021

  86,505 

Vested with service

  22,475 

Issued at vesting

  (22,475)

Vested at March 31, 2022

  86,505 

Vested with service

  34,404 

Issued at termination of service

  (48,386)

Vested at June 30, 2022

  72,523 

Vested with service

  63,607 

Vested at September 30, 2022

  136,130 

 

As of September 30, 2022, issuance of 136,130 shares of common stock subject to the vested RSUs is deferred to the date the holder is no longer providing service to our company.

 

In the three months ended September 30, 2022, we issued the following under the 2014 Plan:

 

 

278,151 RSUs, the issuance of which was subject to shareholder approval of the increase in the shares of common stock authorized for issuance under the 2014 Plan. The RSUs vest over an average of forty-nine months from the July 14, 2022, grant date.

 

65,790 RSUs to our directors which vest on July 14, 2023, or one day prior to the next annual meeting of our shareholders.

 

19,003 RSUs to our directors on July 14, 2022, which were immediately vested, in lieu of paying board fees in cash for the quarter ended June 30, 2022.

 

12

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

30,279 RSUs to our directors on September 30, 2022, which were immediately vested, in lieu of paying board fees in cash for the quarter ended September 30, 2022.

 

9,053 RSUs to employees. The RSUs vest over an average of 8 months from the date of grant.

 

We issued 38,968 SUs to a service provider in September 2022 and an additional 121,032 SUs in November 2022, which the service provider elected to purchase with a $0.2 million cash signing fee. The SUs vest in three annual installments ending in September 2025, and we are expensing the fair value of the SUs over three years. The service provider may also earn performance-based cash compensation beginning October 1, 2022, if certain performance criteria are met. The performance compensation will be paid quarterly in an amount of cash which may then be used to purchase, at the election of the service provider, a number of fully vested SUs equal to (a) the performance compensation, divided by (b) the volume weighted average closing price of our common stock over the 90 consecutive trading days ending on the last day of the applicable performance period. The aggregate number of SUs purchased by the service provider, including the initial 38,968 units and 121,032 units  may not exceed 1,000,000.

 

In April 2022, we modified 11,468 RSUs held by resigning directors such that the awards vested on the date of their termination of service. Prior to the modification, the resigning directors would have forfeited the unvested RSUs on the date of the resignations. As a result of the modifications, we adjusted cumulative expense on the RSUs to equal the fair value of the awards on the date of the April 28, 2022, modification ($5.20 per unit), in accordance with applicable accounting guidance.

 

In the three months ended June 30, 2022, we issued a total of 48,386 shares of common stock pursuant to the terms of vested RSUs, which included the 11,468 modified RSUs discussed in the preceding paragraph. Issuance of the shares of common stock subject to these RSUs was deferred to the date the holder was no longer providing service to our company. In the three months ended March 31, 2022, we issued a total of 22,475 shares of common stock upon the vesting of RSUs.

 

Warrants

 

In the three months ended September 30, 2022, warrants for the purchase of up to 25,000 shares of common stock ($9.60 per share exercise price) expired and as further discussed in Note 12, the exercise price of an outstanding liability warrant (Warrant A) for the purchase of up to 230,769 shares adjusted to $2.72 per share from $10.00 per share. In the three months ended March 31, 2022, warrants for the purchase of up to 614,298 shares of common stock ($9.60 per share exercise price) expired.

 

Subsequent Offering

 

In October 2022, we issued and sold 675,000 shares of our common stock for $1.50 per share and prefunded warrants (the Prefunded Warrants) exercisable into 325,000 shares of our common stock for $1.4999 per warrant, in a registered direct offering.  The Prefunded Warrants had an exercise price of $0.0001 per share and were exercised in full after the offering. In a concurrent private placement, we issued and sold warrants for the purchase up to 2,000,000 shares of our common stock at an exercise price of $1.60 per share, which are exercisable April 20, 2023, and expire October 20, 2025. The net proceeds from the offering totaled $1.2 million, after deducting placement agent fees and other cash offering expenses of $0.3 million. We determined the exercise price of the Prefunded Warrants was nominal and, as such, we will consider the shares underlying those warrants to be outstanding effective October 20, 2022, for the purposes of calculating basic EPS. We intend to use the net proceeds from the offering for general corporate purposes, which may include funding capital expenditures, working capital and repaying indebtedness. 

 

In addition, we issued warrants for the purchase of up to 63,000 shares of our common stock to the placement agent at an exercise price of $1.875 per share, which expire October 20, 2027.

 

NOTE 10. INCOME TAXES

 

Our tax expense for the three and nine months ended September 30, 2022 and 2021, differs from the tax expense computed by applying the U.S. statutory tax rate to net loss from continuing operations before income taxes as no tax benefits were recorded for tax losses generated in the U.S. As of September 30, 2022, we had deferred tax assets primarily related to U.S. federal and state tax loss carryforwards. We provided a full valuation allowance against our deferred tax assets as future realization of such assets is not more likely than not to occur.

 

13

 
 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 11. LOSS PER SHARE (EPS)

 

We calculate basic EPS under the two-class method under which all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities based on their respective rights to receive dividends. Our outstanding convertible preferred stock are considered participating securities as the holders may participate in undistributed earnings with holders of common shares and are not obligated to share in our net losses.

 

We calculate diluted EPS by dividing the net income attributable to RiceBran Technologies common shareholders by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if the impact of assumed exercises and conversions is dilutive. We calculate the dilutive effects of outstanding options, warrants, and nonvested stock units that vest solely on the basis of a service condition are calculated using the treasury stock method. We calculate the dilutive effects of the outstanding preferred stock using the if-converted method.

 

Reconciliations of the numerators and denominators in the EPS computations follow.

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2022

  

2021

  

2022

  

2021

 

NUMERATOR (in thousands):

                

Numerator for basic and diluted EPS - net loss

 $(2,042) $(2,213) $(6,179) $(3,545)
                 

DENOMINATOR:

                

Weighted average number of shares of shares of common stock outstanding

  5,235,005   4,662,004   5,203,504   4,575,587 

Weighted average number of shares of common stock underlying vested RSUs

  97,303   83,680   87,276   56,293 

Denominator for basic and diluted EPS - weighted average number of shares outstanding

  5,332,308   4,745,684   5,290,780   4,631,880 

 

No effects of potentially dilutive securities outstanding were included in the calculation of diluted EPS for the three and nine months ended September 30, 2022 and 2021, because to do so would be antidilutive as a result of our net loss. Potentially dilutive securities outstanding during the three and nine months ended September 30, 2022 and 2021, included our outstanding convertible preferred stock, options, warrants and nonvested stock units.

 

NOTE 12. FAIR VALUE MEASUREMENTS

 

The fair value of cash and cash equivalents, accounts and other receivables, accounts payable and commodities payable approximates their carrying value due to shorter maturities. As of September 30, 2022, the fair values of our operating lease liabilities were approximately $0.5 million lower than their carrying values, based on current market rates for similar debt and leases with similar maturities (Level 3 measurements). As of September 30, 2022, the fair values of our debt and finance lease liabilities approximated their carrying values, based on current market rates for similar debt and leases with similar maturities (Level 3 measurements).

 

The following tables summarize the fair values by input hierarchy of items measured at fair value on a recurring basis on our consolidated balance sheets (in thousands):

 

  

Level 1

  

Level 2

  

Level 3

  

Total

 
                 

Total liabilities at fair value as of September 30, 2022 - Derivative warrant liability

 $-  $-  $234  $234 

Total liabilities at fair value as of December 31, 2021 - Derivative warrant liability

 $-  $-  $258  $258 

Total liabilities at fair value as of September 30, 2021 - Derivative warrant liability

 $-  $-  $647  $647 

 

14

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

The following tables summarize the changes in level 3 items measured at fair value on a recurring basis for the three and nine months ended September 30, 2022 and 2021 (in thousands):

 

  

Fair Value

as of

Beginning of

Period

  

Total
Realized

and

Unrealized
Gains
(Losses)

  

Issuance of

New

Instruments

  

Net
Transfers
(Into) Out

of
Level 3

  

Fair Value,

at End of

Period

  

Change in

Unrealized

Gains

(Losses) on Instruments

Still Held

 

Three months ended September 30, 2022

                        

Total Level 3 fair value - Derivative warrant liability

 $846  $612  $-  $-  $234  $612 

Nine months ended September 30, 2022:

                        

Total Level 3 fair value - Derivative warrant liability

 $258  $24  $-  $-  $234  $24 
                         

Three and nine months ended September 30, 2021

                        

Total Level 3 fair value - Derivative warrant liability

 $-  $-  $647  $-  $647  $- 

 

The derivative warrant liability relates to a warrant issued in September 2021, for the purchase of up to 230,769 shares of common stock (Warrant A). The current $2.72 per share exercise price of Warrant A is subject to adjustment in September 2023 to 110% of the 5-day volume weighted average price of our common stock, if that price is less than the than $2.72 per share. The initial $10.00 per share exercise price of Warrant A adjusted in September 2022 to $2.72 per share. We classify Warrant A in our consolidated balance sheets as derivative warrant liability because the holder may elect cash settlement of this warrant in the event of a change of control. We estimated the fair value of Warrant A as of September 30, 2022, using the Black-Scholes value of a warrant with an exercise price of $2.72 per share. We estimated the fair value of Warrant A as of and December 31, 2021, using the Black-Scholes value of a warrant with an exercise price of $10.00 per share. The changes in the estimated fair value of Warrant A are included in other income (loss) in our consolidated statements of operations. The assumptions used in valuing Warrant A follow.

 

  

September 30,

2022

  

December 31,

2021

 

Assumed volatility

  88.3%  69.5%

Assumed risk free interest rate

  3.2%  0.8%

Expected life of options (in years)

  4.0   4.8 

Expected dividends

  -   - 

 

The fair value of Warrant A approximates the cash settlement the holder could elect to be paid in the event of a change in control. At September 30, 2022, an $0.18 (approximate 10%) increase in our stock price would have resulted in an approximate $32 thousand increase in the Black Scholes fair value of Warrant A.

 

NOTE 13. COMMITMENTS AND CONTINGENCIES

 

PPP Audit Contingency

 

In April 2020, we received $1.8 million on a Small Business Administration (SBA) Payroll Protection Program (PPP) loan as provided for in the Coronavirus Aid, Relief and Economic Security Act, enacted into U.S. law in March 2020. Under certain conditions, the loan and accrued interest were forgivable, if we used the loan proceeds for maintaining workforce levels. We used the loan proceeds for maintaining workforce levels and the SBA forgave the entire loan, and related accrued interest in January 2021. The SBA may audit any PPP loan at its discretion through January 2027, six years after the date the SBA forgave the loan. The SBA may review any or all of the following when auditing a PPP loan: whether the borrower qualified for the PPP loan, whether the PPP loan amount was appropriately calculated and the proceeds used for allowable purposes, and whether the loan forgiveness amount was appropriately determined. The SBA could deem us ineligible for the PPP loan received in 2020 upon audit by the SBA. We believe the SBA’s stated intention is to focus its reviews on borrowers with loans greater than $2 million, thereby mitigating our future risk of an audit. The SBA continues to develop and issue new and updated guidance regarding required borrower certifications and requirements for forgiveness of loans made under the program.

 

15

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

Employment Contracts and Severance Payments

 

In the normal course of business, we periodically enter into employment agreements which incorporate indemnification provisions. While the maximum amount to which we may be exposed under such agreements cannot be reasonably estimated, we maintain insurance coverage, which we believe will effectively mitigate our obligations under these indemnification provisions. No amounts have been recorded in our financial statements with respect to any obligations under such agreements.

 

We have employment contracts with certain officers and key management that include provisions for potential severance payments in the event of without-cause terminations or terminations under certain circumstances after a change in control. In addition, vesting of outstanding nonvested equity grants would accelerate following a change in control.

 

Legal Matters

 

From time to time, we are involved in litigation incidental to the conduct of our business. These matters may relate to employment and labor claims, patent and intellectual property claims, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations. When applicable, we record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position or results of operations. We expense defense as incurred. Defense costs, when incurred, are included in selling, general and administrative expense.

 

NOTE 14. FAILURE TO COMPLY WITH NASDAQ LISTING REQUIREMENTS

 

On September 15, 2021, we received a notification letter from The Nasdaq Stock Market LLC (Nasdaq) indicating that we have failed to comply with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2). Nasdaq Listing Rule 5550(a)(2) requires that companies listed on the Nasdaq Capital Market maintain a minimum bid price of $1.00. To regain compliance with this listing rule, the closing bid price of our common stock had to be at least $1.00 for a period of Nasdaq’s discretion, of at least 10, but not to exceed 20, consecutive business days. On September 12, 2022, Nasdaq notified us that we had regained compliance with the minimum bid price requirement and the matter was closed.

 

16

 
 

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

 

Results of Operations - Three Months Ended September 30, 2022, Compared to Three Months Ended September 30, 2021

 

Revenues of $10.3 million in the third quarter of 2022 increased $3.3 million, or 48.3%, compared to the third quarter of 2021. This year-over-year increase was due to higher core-SRB sales and strong growth from our MGI and Golden Ridge milling operations.

 

Gross loss was $0.7 million in the third quarter of 2022, a $0.4 million increase in gross loss compared to the third quarter of 2021. The increase in gross loss was attributable to lower sales and cost overruns for our value-added SRB derivatives business and higher gross losses at our Golden Ridge milling operation versus a year ago, offset in part by improved profitability from our core-SRB business and MGI milling operation.

 

Selling, general and administrative (SG&A) expenses were $1.8 million in the third quarter of 2022 and the third quarter of 2021 as reductions in corporate support headcount and outside professional services were offset in part by higher wage rates and higher contract employee expense, as well as a double-digit increase in insurance premiums.

 

Due to the increase in gross losses, operating losses were $2.5 million in the third quarter of 2022, up from $2.1 million in the third quarter of 2021. In the third quarter of 2022, we recognized a $0.6 million gain for the change in the fair value of a warrant liability. As a result of higher operating losses being offset by this gain, net loss in the third quarter of 2022 was $2.0 million, or $0.38 per share, compared to a net loss of $2.2 million, or $0.47 per share, in the third quarter of 2021.

 

Results of Operations Nine Months Ended September 30, 2022, Compared to Nine Months Ended September 30, 2021

 

Revenues of $31.0 million in the first nine months of 2022 increased $8.0 million, or 34.7%, compared to the nine months of 2021. This year-over-year increase was due to higher core-SRB sales and strong growth from our MGI and Golden Ridge milling operations, offset in part by lower value-added SRB derivative product revenues due to production issues in the second quarter of 2022.

 

The $1.2 million decrease in gross profit in the first nine months of 2022, compared to the first nine months of 2021, was primarily attributable to lower gross profits from our value-added SRB derivative products and a modest increase in gross losses from Golden Ridge, offset in part by a modest increase in gross profits for our core-SRB business and MGI.

 

SG&A expenses of $5.2 million in the first nine months of 2022 decreased $0.3 million, or 5.7%, compared to the first nine months of 2021, as reductions in corporate support headcount and outside professional services were offset in part by higher wage rates and insurance premiums.

 

We recognized a gain on the involuntary conversion of assets of $0.1 million in the first nine months of 2022, when we finalized our insurance claim for hurricane damage that occurred in August 2020 to our Lake Charles, Louisiana property.

 

Operating losses were $5.7 million in the first nine months of 2022, up from $5.0 million in the first nine months of 2021, due to lower gross profits. In January 2021, we recognized a $1.8 million gain on extinguishment of our Small Business Administration (SBA) Paycheck Protection Program (PPP) loan (see Note 13 of the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion of the loan). As a result of higher operating losses, lower SG&A, the impact of the gain on involuntary conversion of assets and the nonrecurring gain on the extinguishment of debt in the first nine months of 2021, net loss in the first nine months of 2022 was $6.2 million, or $1.17 per share, compared to a net loss of $3.5 million, or $0.38 per share, in the first nine months of 2021.

 

 

Liquidity, Going Concern and Capital Resources

 

We had $4.4 million in cash and equivalents as of September 30, 2022, a decrease of $1.5 million from $5.8 million on December 31, 2021. During the first nine months of 2022, we were able to offset higher operating losses with increased borrowing.

 

Cash used in operating activities in the first nine months of 2022 was $3.9 million, up from $2.0 million in the first nine months of 2021, driven principally by higher net losses. Cash used in investing activities in the 2022 period consisted of $0.4 million in capital expenditures, primarily for the purchase and installation of capital equipment at our MGI facility offset by $0.1 million in insurance proceeds. Cash from financing activities in the 2022 period was $2.7 million, which included the $1.8 million net borrowings on a line of credit and a $0.9 million over-advance on our factoring facility (see Note 8 of the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion of the over-advance).

 

Management believes that despite the multi-year history of operating losses and negative operating cash flows from continuing operations, there is no substantial doubt about our ability to continue as a going concern within one year after the date that these financial statements included in this Quarterly Report are issued. Factors alleviating this concern include $4.4 million in cash and cash equivalents as of September 30, 2022, and our ability to procure additional capital if needed through a variety of sources. Most notably, subsequent to the end of the third quarter of 2022, we were able to raise approximately $1.2 million, net of costs, through a direct placement of our common stock, and common stock equivalents, and in late September 2022, we received a $0.9 million over-advance on our factoring facility, pending a restructuring of our mortgage promissory note secured by our real property in Wynne, Arkansas.

 

On March 30, 2020, we entered into a sales agreement with respect to an at-the-market (ATM) offering program, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $6.0 million, which we currently have $2.8 million remaining. Under the terms of the securities purchase agreement related to the September 2021 offering, we are prohibited from entering into an agreement to effect any at-the-market issuance until September 13, 2023.

 

Critical Accounting Estimates

 

Our discussion and analysis of our financial condition and results of operations are based upon unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures on the date of the financial statements. On an ongoing basis, we evaluate the estimates, including, but not limited to, those related to revenue recognition, inventory valuation, and long-lived asset impairment. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates.

 

Recent Accounting Pronouncements

 

See Note 3 in the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required by this item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosures. As of September 30, 2022, there have been no significant changes to our critical accounting policies and related estimates previously disclosed in our 2021 Annual Report on Form 10-K.

 

 

We evaluated, with the participation of our executive chairman, and chief financial officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our executive chairman and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

 

Changes in Internal Control over Financial Reporting

 

During the most recently completed fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position, results of operations or cash flows. We record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

During the quarter ended September 30, 2022, we issued the securities described below without registration under the Securities Act. The description below does not include issuances that we disclosed previously on Current Reports on Form 8-K. Unless otherwise indicated below, the securities were issued pursuant to the private placement exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act). We made the issuance below without any public solicitation, to a limited number of sophisticated persons and were acquired for investment purposes only.

 

On September 30, 2022, we issued 600 shares of common stock to a service provider, which is not a natural person, as compensation for service provided. The shares were valued at an aggregate of $2,100.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

None

 

Item 5. Other Information

 

Item 3.02 Unregistered Sales of Equity Securities

 

On November 1, 2022, we amended the terms of our engagement of Gander Foods, LLC, a New Jersey limited liability company (the Operator), to perform services in connection with our rice milling operations and those of Golden Ridge Rice Mills, Inc., our wholly owned subsidiary. The engagement was described in our Current Report on Form 8-K filed on September 29, 2022 (the Original 8-K).

 

As amended, the Operator’s initial cash compensation of $200,000 (the Initial Compensation) will be used by the Operator to purchase an aggregate of 160,000 (rather than 38,968) unvested restricted stock units (SUs), each representing the contingent right to receive one share of our common stock. All other terms of the engagement remain the same and are unchanged, and the total amount of SUs that may be purchased by the Operator with the Initial Compensation or the Performance Compensation (as defined in the Original 8-K) may still not exceed 1,000,000.

 

The SUs are being offered and sold in a private placement to an eligible investor pursuant to Section 4(a)(2) of the Securities Act. The SUs and underlying shares of our common stock have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration under or an applicable exemption from registration under the Securities Act and any applicable state securities laws.

 

 

Item 6. Exhibits

 

The following exhibits are attached hereto and filed herewith:

 

       

Incorporated by Reference

   

Exhibit

Number

 

Exhibit Description

 

Form

 

File No.

 

Exhibit

Number

 

Filing/Effective

Date

 

Filed

Here-with

3.1

 

Certificate of Amendment of Articles of Incorporation as field with the California Secretary of State effective August 25, 2022

 

8-K

 

001-36245

 

3.1

 

August 25, 2022

   

31.1

 

Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

                 

X

31.2

 

Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

                 

X

32.1

 

Certification by Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                 

X

101.INS (1)

 

Inline XBRL Instance Document

                 

X

101.SCH (1)

 

Inline XBRL Taxonomy Extension Schema Document

                 

X

101.CAL (1)

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

                 

X

101.DEF (1)

 

Inline XBRL Taxonomy Extension Calculation Definition Linkbase Document

                 

X

101.LAB (1)

 

Inline XBRL Taxonomy Extension Calculation Label Linkbase Document

                 

X

101.PRE (1)

 

Inline XBRL Taxonomy Extension Calculation Presentation Linkbase Document

                 

X

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

                   

 

 

(1)

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: November 3, 2022

RiceBran Technologies

     
 

/s/ Peter G. Bradley

 
 

Peter G. Bradley

 

Director and Executive Chairman

 

 

/s/ Todd T. Mitchell

 
 

Todd T. Mitchell

 

Chief Financial Officer and Chief Operating Officer

 

21